Leon Hitchcock is 36 years old today and he wishes to accumulate $538,000 by his 59th...
Leon Hitchcock is 36 years old today and he wishes to accumulate $538,000 by his 59th birthday so he can retire to his summer place on Lake Hopatcong. He wishes to accumulate this amount by making equal deposits on his 36th through his 58th birthdays. What annual deposit must Leon make if the fund will earn 8% interest compounded annually?
Homework Answers
Amount required = $538000
Number of years = 23 years
Future value of annuity due = (1+r)*Annual amount*[{(1+r)^n - 1}/r]
Let annual deposits be x
538000 = (1.08)*x*[{(1.08)^23 - 1}/0.08]
538000 = 65.7647592x
x = $8,180.67
Hence, annual deposits required = $8,180.67
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